If you’ve ever taken a flight or stayed at a hotel and then received a follow-up email with a customer service survey, you’ve encountered Medallia or Qualtrics — two companies that sell survey and feedback software to companies in travel and other verticals. The rapid growth of these subscription-based software companies is impacting the so-called customer experience technologies used by companies — particularly the major travel brands that are among the largest customers.

Medallia is on course to file an initial public offering this year, company executives said. The San Mateo-based company’s most recent funding round — led by venture firm Sequoia — placed a $1.25 billion valuation on the company. In August, Medallia appointed Leslie Stretch to the CEO role, who replaced co-founder Borge Hald. Stretch previously led CallidusCloud, a software company, into an acquisition by SAP. Sequoia picked him as a stable hand to lead an effort to go public.

Last November Qualtrics, another customer sentiment tracking firm that also has many travel clients, cut short its planned IPO. The Provo, Utah-based company accepted an acquisition offer by business software giant SAP for $8 billion.

Travel companies often rely on survey data to reveal problems that their operational data can’t catch.

For example, JetBlue recently saw that it had one flight with consistently negative customer experience feedback. The operational data was all good, however. Flights were on time, prices were standard for the route, and so forth.

However, by looking at the experience data collected via Qualtrics, JetBlue found the issue. The flight was so early in the morning that none of the shops had opened yet and passengers were unable to get coffee and breakfast before boarding the plane. It instituted a program where they provide drinks and food at the gate for this flight and customer experience rose significantly.

Medallia Grows Rapidly

Medallia’s executives have not formally announced a date for an initial public offering other than to say it’s likely by the end of this spring.

The 1,300 employee-company has raised $255 million in funding to date. It said it generated more than $250 million in revenue last year.

Medallia’s first customers, two decades ago, were hospitality clients. Today many travel companies use its services. Seven of the world’s ten largest hotel companies — among about 50 hotel brands — use its enterprise-wide services, as do Delta Air Lines, Carnival Corporation, and Royal Caribbean Cruises.

A case in point: Last August, Wyndham Hotel and Resorts CEO Geoffrey Ballotti explained to investors that his company has been “very focused on trying to raise our quality scores, which we have been doing from our internal ratings with our Medallia scores and external social media scores.” As a result of feedback via Medallia and online reviews platforms like TripAdvisor, the company removed roughly 80,000 rooms domestically specifically because they didn’t meet the company’s brand standards.

Fresh capital from an IPO will affect Medallia’s product development. It plans to invest further in using artificial intelligence to tease out actionable insights from data.

“We’ll lean on machine learning to help automatically bubble up insights from the data and identify possible solutions that have would have the most optimal outcomes for their customers,” said Geoffrey Ryskamp, global head of Medallia’s hospitality, travel, and leisure practice.

Companies generate fountains of data but often flounder at teasing out insights from it and then telling the right operational person the best action to take in response.

“We also want to allow travel organizations to test more quickly to drive a faster pace of improvement,” said Ryskamp. He said the company will increasingly be able to help hotel companies layer in operational data, such as the source of bookings, the prices guests paid, and the relative rank of value of hotel rooms booked to better strategize on campaigns.

Its tools could help a hotel owner evaluate the effectiveness of a renovation in a model room or the use of voice assistants like Alexa before rolling the experiment out across a brand, Ryskamp said.

Qualtrics Goes Global

The 2,000-employee Qualtrics generated about $400 million in 2018. Qualtrics only has about 9,000 customers, including about 75 percent of Fortune 100 companies. But about 80 percent of its clients are based in the U.S.

SAP plans to use its 15,000 salespeople to tout Qualtrics’ software to its 413,000 customers worldwide.

Travel clients have been key to growth at Qualtrics. Many of them use its tools for collecting and analyzing market research and repeat customer data.

For example, American Airlines recently used Qualtrics to survey customers about their opinion of their airport lounges, with questions about whether employees smiled at the customers and if they thanked them. It surveyed passengers with questions about flight attendants, such as whether the crew made eye contact during a flight. And it surveyed members of its loyalty program about the entertainment services they use, such as Hulu and Netflix, and how they currently consume that content, such as which wireless provider they use, such as Verizon or T-Mobile — hinting at product research for the carrier’s in-flight entertainment system.

“A great example of a travel brand that has benefited from Qualtrics is JetBlue,” said Mike Maughan, head of global insights at Qualtrics.

“For example, JetBlue discovered that customers cared far more about affordable tickets than they did about free bags. As a result, they introduced new rate structures and pricing options.”

SAP’s capital support is also driving product development. Qualtrics plans to enhance its tools, such as its recently debuted iQ Directory, which claims to give brands a 360-degree view of every customer interaction from the actions they took to estimates of the emotions, sentiments, and beliefs that drove their behavior.

Uber-Style Star Ratings for Workers

Both Medallia and Qualtrics offer an array of tools. Beyond customer sentiment analysis, they are primarily gaining traction for employee-based tools.

As travel brands struggle to recruit, survey data on employee satisfaction can help brands ensure that they frame their workplace cultures in the best light to attract the best talent.

Slowly, the two types of data — customer survey and employee data — will get blended. Traveler feedback is changing how travel brands rate their workers. Companies have seen how Uber and Lyft have used passenger ratings of drivers to weed out poor performing drivers. Hospitality software companies and airlines are experimenting with similarly incorporating traveler feedback in employee evaluations.

Someday every person in the travel industry may have a guest-influenced score as part of their workplace performance evaluation.

Danger of Survey Fatigue

One risk to the growth of customer experience, or “voice-of-the-customer,” companies is saturation. Many travelers feel overwhelmed by all the surveys. A typical trip may include, say, two surveys about a hotel stay (one from the hotel and one from the travel agency that sold the room) plus a couple queries from the airline and the car rental company.

As companies brush up against the limits of customer patience, they need to move beyond surveys. They need to analyze signals from customer relationship management software and operational data and to monitor public commentary about brands on social media and reviews sites.

SAP CEO Bill McDermott told investors on a call about the Qualtrics acquisition that the blending of operational data to survey data is a critical next step. When it comes to customer retention, he argued that there were two pieces to the puzzle.

The first puzzle piece is operational data, or what it calls O-data, from the systems that run companies. McDermott called the second piece of the puzzle experience data, or X-data, which refers to actual responses in real time from customers to the question of whether they’re satisfied by the experience or product.

“Think of it this way: the O-Data tells you what happened, and the X-Data tells you why it happened,” said CEO Bill McDermott.

More Acquisitions Likely

The category of customer experience companies remains small. But it has a big impact on the travel industry, which is primarily about delivering experiences. Demand from the travel sector will ensure growth for the providers of these tech tools.

More financial activity in the sector is likely. Other players in the space, though with significantly fewer marquee travel brand clients, include Cendyn, Clarabridge, CloudCherry, InMoment, NICE, Survey Monkey, TrustPilot, UserTesting, and Verint.

Enterprise software giants like Adobe, Amadeus, Microsoft, Oracle, Sabre, and Salesforce that have many travel clients for their software services may be tempted to acquire customer experience companies to have similar synergies to the SAP/Qualtrics deal.